(CTN News) – Liz Truss’ new government has announced fresh tax cuts, with Chancellor Kwasi Kwarteng suggesting further cuts will follow. As a result, the pound has sunk to a record low against the dollar.
The pound was worth $1.04 on Monday, September 26.
The pound’s decline in global exchange markets affects household finances as well as how much can be spent abroad.
Importing produce into the UK becomes more expensive with a lower-value pound.
A key import in the UK is oil, which is priced in dollars. Your car will likely cost more to fill up as a result.
It is possible that other items that are made abroad, such as smartphones and laptops, or products with parts imported from abroad, like cars, will also increase in price.
Why is the pound falling against the dollar?
Over the past few weeks, the pound has already lost value against the dollar, partly because of the strength of the dollar.
Kwarteng’s mini-budget, which included large tax cuts, triggered the current record low.
There are concerns that the tax cuts will not be fully funded, pushing the Bank of England further into debt.
The pound has fallen further against the dollar in 2022 than other global currencies.
Sterling’s value is determined by its demand, and demand is very low at the moment.
The demand for goods is influenced by a number of factors, such as the economy, national savings, the price of goods, and state finances.
Why is the dollar strong?
Because the US economy is so large and usually strong, the dollar is often used to value other currencies.
Historically, the US has been a reliable source of economic growth. The UK has strong trade associations with the US, which is why the two currencies are often compared.